Cloud is going to take time

$233.4 billion. That’s how much analyst firm IDC said the world spent on cloud (SaaS, IaaS, PaaS) in 2019. It sounds like a lot of money, right? According to a quick Internet search, $233 billion is how much China plans to spend on defense. It’s now much Bill Gates could save by “reinventing the toilet.” And it’s how much the meeting industry expects to lose due to the pandemic curtailing travel.

But $233.4 billion is a rounding error compared to the $4 trillion that organizations will spend on IT in 2020, according to IDC. Just 5.8 percent. The fixation on cloud revenues only serves to distort the reality of how organizations spend their IT budgets today.

But growth!

Sure, if we look at where the growth in IT is, cloud is hot. (Note: IDC includes Devices, Infrastructure (server/storage/network hardware and cloud services), Software, and IT services in its IT spending number.) As IDC vice president Stephen Minton recently said,

Where there is growth, most of it is in the cloud. Overall software spending is now expected to decline as businesses delay new projects and application roll-outs…. On the other hand, the amount of data that companies must store and manage is not going anywhere. Increasingly, even more of that data will be stored, managed, and increasingly also analysed in the cloud.

Let’s take China as an example.

On Alibaba’s recent earnings call, executive vice-chair Joe Tsai pointed out that China’s total cloud market is still relatively small compared to the western markets, just $15 to $20 billion. Even so, that’s a bigger share of the total Chinese IT market ($297 billion in 2020, according to IDC) than the global percentage.

As for growth, as Tsai went on to project, “The China market is going to be a much faster-growing market in cloud than the U.S. market.” At Alibaba’s roughly $7 billion annual run rate, coupled with 59 percent annual growth in the most recent quarter, there’s a long way to go to catch up to IDC’s other prediction: 90 percent of applications in China will be cloud-native by 2025. If the Chinese market gets anywhere near that number, that represents impressive growth, indeed.

Copyright © 2020 IDG Communications, Inc.

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